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Democratization and the Conditional Dynamics of Income Distribution

  • MICHAEL T. DORSCH (a1) and PAUL MAAREK (a2)

Abstract

Despite strong theoretical reasons to expect that democratization equalizes income distributions, existing empirical studies do not find a statistically significant effect of democratization on measures of income inequality. This paper starts from the simple observation that autocracies are heterogeneous and govern quite extreme distributional outcomes (also egalitarian). Democratization may drive extreme income distributions to a “middle ground.” We thus examine the extent to which initial inequality levels determine the path of distributional dynamics following democratization. Using fixed-effects and instrumental variable regressions, we demonstrate that egalitarian autocracies become more unequal following democratization, whereas democratization has an equalizing effect in highly unequal autocracies. The effect appears to be driven by changes in gross (market) inequality, suggesting that democratization has led, on average, to redistribution of market opportunities, rather than to direct fiscal redistribution. We then investigate which kinds of (heterogeneous) reforms are at work following democratizations that may rationalize our findings.

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Corresponding author

*Michael T. Dorsch, Associate Professor, School of Public Policy, Central European University, Budapest, Hungary, DorschM@ceu.edu.
Paul Maarek, Associate Professor, LEMMA, Université Panthéon-Assas (Paris 2), France, paul.maarek@u-paris2.fr.

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We are grateful for the thoughtful comments of seminar audiences at the ETH Zurich, Université de Paris 1 La Sorbonne, the University of Gothenburg, the Stockholm School of Economics (in Stockholm and Riga), the Insper Institute (São Paolo), the University of the State of Rio de Janeiro, and the Political Economy Research Group at Central European University. We also thank participants at the annual meetings of the European Public Choice Society (Freiburg and Budapest), the Network of European Peace Scientists (Milan), the Silvaplana Workshop on Political Economy, the conference on the Political Economy of Democracy and Dictatorship (Münster), and the Journées Louis-André Gérard-Varet (Aix-en-Provence) for helpful comments. In particular, we received comments that improved the paper from Toké Aidt, Rémi Bazillier, Ricardo Ceneviva, Vera Eichenauer, François Facchini, Arye Hillman, Andrew Li, Levente Littvay, Pierre-Guillaume Méon, Rodrigo Moita, and Jan-Egbert Sturm. Four anonymous referees and the editor in charge of our submission provided constructive criticisms that greatly improved the paper. Of course, all remaining errors are our own. Some of this research was carried out while Dorsch was visiting the Institute for Advanced Study at the Université de Cergy-Pontoise and he is grateful for their hospitality and financial support. Replication files are available at the American Political Science Review Dataverse: https://doi.org/10.7910/DVN/D64FNB.

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